Cooler demand from NEVs, higher supplies to limit upside in lithium carbonate prices 

SHANGHAI, May 15 (SMM) – Slower demand from the new energy market and expanding supplies will limit the upside room in prices of battery-grade lithium carbonate, after a supply shortage and higher costs of raw materials buoyed prices at the start of the month, SMM believes. 

A turning point in prices of lithium carbonate is expected at the end of the second quarter. SMM retains its bearish outlook on prices through the second half of the year. 

Lithium carbonate producers are scheduled to maintain normal operation in May, and this may raise domestic output by 20% from April, to 13,900 mt in May. Lanke Lithium and some other major producers planned to hike output considerably in June. 

Support from the electric vehicle market will wane next month as production enthusiasm across carmakers cool on the approaching subsidy cuts after the grace period. SMM forecasts the output of cathode materials to remain flat on the month in May. 

Maintenance across producers in Qinghai bolstered prices of industrial-grade lithium carbonate, which serve as raw materials for around 13% of battery-grade lithium carbonate products in the market. 

Prices of industrial-grade lithium carbonate climbed by 1,000-2,000 yuan/mt in the latter half of April, and saw prices of battery-grade lithium carbonate expanding some 1,000 yuan/mt from the start of May, to 76,000-79,000 yuan/mt as of May 14. 

Slow release of new capacity, constrained by a bottleneck in smelting technique, also accounted for higher prices of lithium carbonate. While a slew of new projects was constructed in 2019, only one at Ganfeng Lithium, with a capacity of 17,500 mt, has entered operation, SMM learned. 

Last month, regular maintenance at Tianqi Lithium, with a 32% share in domestic lithium carbonate market, affected the production of battery-grade lithium carbonate that uses lithium ore as raw materials. 

Higher downstream demand from the new energy sector, as carmakers stepped-up production to chase subsidies before the transition period ends on June 26, expanded the output of cathode materials and thus buoyed prices of lithium carbonate. We expect the production enthusiasm to last till the end of May. 

SMM data showed that China’s output of lithium manganese oxide (LMO) increased 16% on the month in April, to 5,200 mt, after jumped 106% month on month in March. On a monthly basis, production of lithium iron phosphate (LFP) grew 30% in April, to 8,500 mt, following a rise of 38% in March. 

Falling price of LMO and LFP since February eroded profits at producers, and drove them to procure cheap industrial-grade lithium carbonate as raw materials, SMM learned. 

SMM assessed that the average price of LFP lost almost 15% from February 11, and posted 50,000 yuan/mt as of Tuesday May 14.